Town Square

Americans and the Economy Need More Help

Original post made
by stephen levy, University South,
on Dec 5, 2009

The national employment report gives solid hope that the jobs recession is ending. Monthly job losses averaged 103,000 for the past 4 months down from 397,000 in the preceding 4 months and 689,000 for the 4 months before that.

But the end of job losses does not tell us when job gains will begin or how strong they will be. Unless job gains are much larger than currently expected, unemployment rates will remain above 8% for many years.

We can and should strive to do better.

The Obama administration is considering a new round of federal assistance to spur job growth. Americans deserve a smart and bold approach to further aid to help the economy and the millions of Americans who have lost jobs, income, houses or all of these.

The next round of federal assistance should focus on two clear and generally bipartisan objectives: 1) extending safety net spending and 2) making investments that offer a double or triple bottom line return.

We should extend safety net spending because the recession has gone on longer than expected and families are about to lose unemployment and health insurance benefits, not because the economy is in recovery, but because we misjudged how long these programs would be needed. Safety net spending includes unemployment insurance, help in paying for COBRA health insurance coverage for unemployed workers, food stamps and Medicaid coverage.

The reasons for federal safety net funding have not ended so the funding should continue. In addition economists agree that safety net programs like unemployment insurance and food stamps have the largest "bang for the buck".

Beyond extending safety net spending to honor America's social contract with people thrown out of work through no fault of their own, we should target remaining funding to programs that offer a "double or triple bottom line investment" a phrase first coined by Phil Angelides as California's treasurer.
Investments can be in people, in infrastructure and in programs that offer energy efficiency. These investments offer a "twofer". Infrastructure spending is the other category of federal aid with a large "bang for the buck" in terms of immediate job and income creation, but careful investments also provide an ongoing stream of benefits because they create assets that increase incomes or reduce costs for years into the future.

These assets can be transportation improvements, energy efficiency (the administration is considering a "cash for caulkers" program to spur weatherization) and a labor force with better skills.

A portion of this safety net and investment spending should be directed to helping state and local governments that are struggling to maintain services and investments for the future.

It is criminal that students and workers are being turned away from education and training at precisely the time when it is most needed and when people have time because they are unemployed. We are not acting like a nation that believes our future depends on the skill of our labor force.

And we get a triple bottom line if these investments create jobs now, leave a lasting stream of income gains or cost savings and address energy efficiency and other environmental goals.

Sadly the Debate over Past Federal Aid and Future Proposals will Continue

Our politics has become both timid and opportunistic. We have been in a mostly silly and misdirected debate over past "stimulus" efforts and, unfortunately that will continue even while persistent unemployment eats at the fabric of families and society and leaves us further behind in the race to be competitive in the world economy.

Republicans will criticize Obama's new initiatives partly for ideological reasons and partly for political reasons. I fear that if these were President McCain's proposals that Democrats would want to paint the long and lingering recession as his fault. Our politics is as if this were business as usual and not a serious period of economic distress.

The political debate also misses what I think is the real message from the disappointing economic indicators this year.

First, the $787 billion "stimulus" program is only one of a large arsenal of weapons thrown at the economic downturn including many that started before the November 2008 election and most that were bipartisan when approved. We have had interest rate cuts since 2007, the TARP program enacted before the election, ongoing support for financial and housing markets from the FHA, Federal Reserve Bank and Treasury and targeted tax credits for autos and housing.

If there is failure or frustration it cannot be linked to just one part of the massive effort launched to prevent even more serious economic turmoil or to start a recovery. All of these efforts combined have failed so far to launch a strong recovery in job growth.

To me the real message is that people and businesses are scared, are acting cautiously and have a major priority to rebuild their balance sheets and credit positions. All of these interest rate, tax and spending measures have not created enough customers to prompt businesses to expand production and hire more workers. For very sensible reasons our policies are facing a skeptical and fearful set of customers.

So the heavy lifting still needs to be done by government policies until consumers and businesses have the incentive to increase spending.

The government is needed versus government is evil debate is off point at best. The solid evidence is that government spending has the biggest immediate bang for the buck. I think the previous stimulus package was not sufficiently timely or targeted and it has given government stimulus efforts a bad name but we can do better this time.

But the money eventually gets spent in the private sector in any event. Infrastructure projects are done by private sector companies hiring workers and buying materials from other private sector companies. Unemployment insurance benefits are spent in the private sector economy as is nearly all of the extra safety net spending. Teachers and school janitors who have jobs through stimulus funding spend their income in the private sector.

And we are beginning to see the potential for energy grant funds to stimulate private sector venture capital activity.

So Let's get on with the Job of Turning the End of the Recession into the Beginning of a Strong Recovery

The need for additional federal assistance does not eliminate the need for a plan to reduce the deficit once the economy is in recovery. It does not eliminate the need to make sure that the money is spent wisely and quickly, which was not always done in the first stimulus program.

And it does not completely eliminate legitimate differences as to how best to structure the next round of spending although I think continuing the safety net and double bottom line investing are clear guidelines for sound funding strategies.

Comments

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Posted by James
a resident of Midtown
on Dec 5, 2009 at 1:36 pm

I prefer to eliminate all income taxes and capital gains taxes and inheritance taxes. We should be taxing consumption, both directly and via a VAT. Simply eliminating the capital gains tax would be a huge boost for small business...and they would start to hire. The elimination of the heavy burden of accountants and tax specialists dedicated to schemes minimizing taxation would also be a boon to business and government and individuals.

The one huge single thing that would make sense is to go on a crash program to build nuclear power plants. Private capital can and will fund these plants, but the government must allow them to be built. This would be a true triple bottom line investment. Of course, the electricity to be consumed from these plants would be taxed, like any other consumption product. The same basic argument works for solar and wind, but they are not serious candidates for base load electricity.

There are many things we should do, and could do, but just printing more money, and handing it out, is the wrong way to go. We need jobs, not welfare.

Posted by A 3rd Stimulus
a resident of Meadow Park
on Dec 6, 2009 at 4:39 pm

Sarcasm alert...

No no no...let's keep doing what we are doing..giving water to a drowning man.

Economies have a natural expansion and contraction cycle, which nobody should mess with. But, of course, this time a natural contraction was distorted by and worsened by Fed govt interventions. Cpnservatives cried FOUL, but the Repubs and Dems both were so afraid to not "do something"..they did... unfortunately. So, Mr. Levy "bipartisan" just doesn't cut it when there is really just one party in power, the party of "bigger government" whether it is a Repub or a Dem.

Conservatives have been consistent. Go back to the original powers of the Feds. Stop messing around with free trade and distorting the ability of millions of people to drive our economy.

But, we didn't do that. We did the "bipartisan" wealth transfer and govt takeover solutions. Which addes more distortions and control by the Feds.

With GREAT RESULTS!! Which of course sent our economy into a faster tailspin. Which led the uninformed to believe that what we needed to do was elect into full and absolute power with no checks a party which wants to quadruple the glasses of water we are giving to the drowning man.

Honestly, McCain and his ilk in the Repub party were a huge part of the problem. They wanted to give 1 glass of water...still not good. Frankly, I am glad to watch the dreams come true of the leftists and have them take full responsiblity for the results. It will help clean up the Repub Party and bring it back to its roots.

But, in the meantime, clearly we need to have some more of the hair of the dog that bit us!

Let's do some more!

Time for a 3rd stimulus, since the first 2 have done such a great job! ( The first one was only about 300 billion, in the forms of checks to buy votes, remember that one?) And more regulations!! Time for more central power grabbing! More debt! More control of private businesses by Czars who haven't a clue! More separation of the market from the actual consumer, so the average consumer can't vote with his pocketbook!

Time to keep scaring investors away from our country, let alone scaring venture capitalists away from our businesses...since we have no clue how far this will go.

Mr. Levy, with all due respect, this sentence " The solid evidence is that government spending has the biggest immediate bang for the buck." is so patently proven false, so patently proven to be completely the opposite in multiplier factors and has been proven false sine Keynes first talked FDR into this fallacy, I have to wonder why you think it is acceptable to continue the myth.

When first proposed, in 1930 or so, before it was implemented and studied, it seemed to make sense. However, Keynes has long since been disproved, not only through economists, but through history. Few left still even rent the idea, let alone buy into it.

What do we need to do? Get Govt out of our way, let people invest and work and risk..and REAP THE BENEFITS of their work and investments..and start growing their businesses, their employees, their wealth..our tax base, our donation base, our economy.

Bring back a MASSIVE rich-poor gap..bring back flow-down wealth instead of flow-up poverty. Bring back tax coffers overflowing from a great economy.

"It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, "in political arithmetic, two and two do not always make four .'' If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them."

Sounds good, good intentions, but I think we are so far away from doing whatever is reasonable for the American people.

The conversation is always about taxes and how to get away with paying little or no taxes, while the debt and deficit rise, the infrastructure ages and the damage that is done that we will never acknowledge or pay for to soldiers, or the workers just piles up.

Why is this country so self-righteous about everything we do, when we do very little compared with other developed countries? We justify it by empty appeals to religion and the Constitution, which is a great historic document, but the US Constitution is now the oldest or one of the oldest documents of its kind in the world at this point.

We have to change the way we work, and that is a long way off I fear, a lot of pain and misery and bad decisions and choices are still going to be made. We are not acting procactively, or intelligently. We are in the grips of minority elites who will do anything to justify their continued profit, people who are so far away from reality would need to be smacked over the head with it to see it.

Posted by A 3rd Stimulus
a resident of Meadow Park
on Dec 7, 2009 at 6:36 am

Anon: We pay 30-40%, depending on which program, of th UN fees for all its programs, including all of its "giving" programs. Are we 30% of the population? No, we are 5%.

We give more per capita from our own after-tax pocketbooks to any disaster relief efforts than any other country in the world, either through the Red Cross or our local churches.

The conversation is not about how to get away with little or no taxes,..we are the 3rd highest corporate tax rate in the world..why do you think our corporations are moving to the lower corporoate tax rate countries?

We do, indeed, have one of the oldest documents of its kind in the world, and the REASON we still have it is because it works...a government whose job is to protect the individual rights to life, liberty and property ( translation....the fruits of your labor) protects a nation best and longest. A govt which decides it has the "job" of distributing the fruits of the labor of its people to those who didn't earn it rapidly falls apart. Not coincidentally, a country like that also does the best job of raising the standard of living of its lowest 20%, its poor in other words, as the water of economic activity raises the boat with everyone on it.

Study the history of our country. Study other countries. Look at the "great" utopian socialist countries of Europe right now. Compare their lowest 20% to ours in standard of living.

So, in one way you are right. We DO have to change BACK to the way we work when capitalism and freedom were still legal.

It is about, as you said< "We are in the grips of minority elites who will do anything to justify their continued... POWER , ( my replacement word) people who are so far away from reality would need to be smacked over the head with it to see it.".

We have been taken over by the Utopian dreams of the 60s, by people who never looked across the ocean to see what happened in just one generation to other countries that "succeeded" in implementing everything these guys are now trying to do. They never even looked north across our border to see what these "dreams of our parents" did even in Canada.

We have to go through this, for some reason, every 20-30 years. We did it in the 70s..and here we are already again.

Posted by Time for balance again
a resident of Another Palo Alto neighborhood
on Dec 8, 2009 at 9:13 am

First we should ask rich conservatives to pony up for their wars and interest we've been paying on all that debt. And for letting the infrastructure fall into ruin (infrastructure and stability they availed themselves of to make their money). And for the part of the economic collapse due to their rabid deregulation. For the health and environmental cleanup costs resulting from their polluting industries. And for their disproportionate use of and benefit from our security and strong military. At some point, they should be asked to pay their fair share. How much healthy international commerce would be have -- would the wealthy benefit from -- if our country and economy resembled Mexico more (the direction we're headed)?

We should go back at least halfway to the taxes of the wealthy in the Eisenhower years (which in case anyone didn't notice, happened with lots of prosperity then and to follow, and built the infrastructure and workforce of a great nation), pay off old debts, and invest in the future.

America doesn't have a "social contract" with people. America was built on individual rights, not collectivism. Taking from the productive and giving to the unproductive won't build our economy. Everyone will benefit from an economy built on individual initiative.

Wray ... think "We the people" ... or maybe you do not believe in the Constitution. No one is talking about killing individual initiative, and the constant twisting of discussion based on posts like yours is such a waste of time.

The false arguments against Europe are just laughable. I have been around long enough to have heard about the imminent collapse of the European socialist countries for decades, and who is collapsing? Who is broke? Who is dead last in an increasing number of dimensions, and who is paying trillions of dollars they do not have to maintain troops in over 100 countries of the world.

So, what kind of talk is it that says in the US capitalism and freedom are illegal. Maybe the freedom to steal and rip off the public and to propagandize for a system that does not work? To give corporations rights over people, and put people under such pressure they cannot stand up for their human rights. This is just a disinformational argument in favor of fascism.

Posted by stephen levy
a resident of University South
on Dec 10, 2009 at 4:13 pmstephen levy is a registered user.

The challenge facing the economy now is that there are not enough custormers. Businesses and consumers are cautious and interested in rebuilding their balance sheets.

That is why it is still up to federal programs to be the customer of last resort through direcing money where it will get put back into the economy and create private sector customers. This can be infrastructure, safety net spending and aid to state and local governments.

Today's Wall Street Journal provides evidence for this view in interviews with small business owners in response to Obama's tax incentive proposals for small businesses.

"Business owners across the country said they appreciate the recent attention to their plight, but say that for the credit to make a difference they need to see more specifics--and more customers.

"Give me a tax so I can hire somebody? That's not a really big incentive for me," said Mark Simcavage of Simcavage Corp, a Blakeslee, PA commerical evacuation company that employs four. "We need customers in the door".

Most owners interviewed in the article agreed that lack of custormers was the big barrier to hiring.

The normal incentives of very low interest rates and tax cuts have been of only some help in getting job growth going. Policies that work in normal business cycles will not work fast enough when businesses and residents have seen a sharp decline in their wealth and the combination of legitimate caution and fear have taken over.

Americans and the economy need more help and I hope that President Obama is bold in funding the initiatives he laid out on Tuesday.